The Strait of Hormuz RED FLAG NOBODY SEES!

Wall Street is celebrating lower oil prices and progress on an Iran deal.

But while markets price optimism, shipping data from the Strait of Hormuz tells a much more complicated story.

In this episode of Wall Street Truth Bombs, we break down the real state of negotiations, why shipping traffic suddenly collapsed again, and how three possible outcomes could impact gas prices, inflation, interest rates, and your portfolio.

The next few weeks may determine where oil prices head for the rest of the year.

Subscribe: https://www.youtube.com/@wstruthbombs?sub_confirmation=1

Substack: https://substack.com/@wstruthbombs
X: https://x.com/WSTruthBombs
Patreon: https://www.patreon.com/wstruthbombs
BlueSky: https://bsky.app/profile/wstruthbombs.bsky.social
TikTok: https://www.tiktok.com/@wstruthbombs

Truthbombs videos are for informational and entertainment purposes only. The views expressed by Mark Malek or guests are their own and do not necessarily reflect those of Siebert Financial. These videos do  not constitute investment advice, an offer to sell, or a solicitation to buy any securities. Past performance is not indicative of future results. Listeners and viewers should consult a qualified financial professional before making any investment decisions.

#oilcrisis #straitofhormuz #stocks #inflation #stockmarket #federalreserve #gasprices #wallstreet #investing #truthbombs #wallstreettruthbombs

Transcript

SPEAKER_00 0:00

Picture this. JD Vance is standing in front of Lake Lucerne in Switzerland. He's telling you that the Iran deal is working. And oil's at 74 bucks. Before you breathe that sigh of relief, though, I want to show you what happened the very same weekend that he said all that stuff. By the end of this video, you're going to understand three things what the Iran deal actually is versus what the press conference says that it is, what the real-time shipping data is showing you about the Strait of Horror moves right now, and how each of the three most likely scenarios lands directly in your wallet and gas prices and inflation, and of course, in what the Fed does next. This is not a foreign policy discussion. This is your money. Let's start with what the mainstream narrative is giving you right now, because it's not wrong. It's just incomplete. The MOU, the memorandum of understanding, was signed on June 17th. That's day one of a 60-day clock. The hard deadline for a final deal is August 16th. Over the weekend at the Bergenstock Resort in Switzerland, the first high-level session under that framework took place. And by all accounts, it was a genuine 18-hour grind. Four formal working groups have now been established sanctions, termination, nuclear affairs, reconstruction and economic development, and monitoring and implementation. J.D. Vance described it using a house building metaphor. Foundation is poured. Framing has not started yet. And here's the physical reality on the water. Before the war started on February 28th, roughly 100 to 135 ships transited the Strait of Hermoose every single day. You probably know that by now. That water carries approximately 20% of the world's seaborne oil, and nearly as much of it is liquefied natural gas. I know you know that by now. When Iran effectively shut it down after the initial strikes, traffic collapsed to an average of six ships per day between March and late May. Between June 19th and June 21st, right around the time the Swiss talks were getting underway, marine traffic recorded 71 confirmed transits over three days, including a peak of 35 in a single day. The market bought the recovery story. WOTI crude is trading around $74 a barrel this morning. At the peak of the spring crisis, it was north of $95. Goldman Sachs revised its Brent forecast after the MOU was signed, now sees $80 for the fourth quarter of 26 and $75 as the 2027 average. The national average for gas hit $4.55 in May. This morning, it sits around $3.93 and it's falling. Kuwait has officially lifted its force majeure notices. Abu Dhabi's adnoc has resumed supply operations. The U.S. Treasury issued a 60-day waiver on Iran oil sales this week, running through August 21st, providing a legal runway for Iranium barrels to flow back into the market. That's the surface story. It's a genuinely encouraging set of facts. I'm not dismissing any of it, but I want you to look at last Saturday before we get deeper. If you like this type of content, please click like and don't forget to subscribe. It's important to be in the know. And this is exactly, my friends, how you do it. Okay, here's the thing I want you to understand before we do go deeper. I'm not here to tell you that the deal won't happen. I'm here to tell you what the market is now pricing, because there's a difference between optimism and accuracy. And when it comes to your portfolio, that difference is measured in dollars. On Saturday, the same weekend that Swiss talks were underway and Vance was making optimistic statements to the press. Iran's Revolutionary Guard declared the Strait of Hormuz closed. Again, not partially restricted, closed. The traffic had climbed back toward 35 ships on Friday, dropped to 12 ships by Sunday. Let me put that in context. 12 ships. The strait at its normal capacity, operating capacities, handles about 100 to 135 ships a day, as I said before. 12 is where we were the worst weeks of the initial blockade. We've not recovered yet. We're oscillating an oscillation in a strait that carries 20% of the world's oil. My friends, it's not a deal. It's a negotiation with one hand on the valve. Here's the shadow data that the mainstream coverage is soft pedaling. You know I love the shadow data. Insurance underwriters are still running war risk premiums at roughly eight times, eight times their pre-crisis level. That's a lot. Those premiums don't come down because JD Vance holds a press conference in front of a lake. They come down when the underwriters themselves see verified, sustained, safe transit, actual ships moving without incident for weeks. We're not there yet. And elevated war risk premiums mean every barrel moving in the strait costs more, which means every gallon at your pump carries an invisible surcharge. The headline price does not show. And now the thing I need you to hold above everything else in this whole video. Vance said specifically that the IAEA nuclear inspectors would be on the ground in Iran at a minimum this week. Iran's foreign ministry has already denied making any new commitments on inspections, directly contradicting what Vance said in front of those cameras and that beautiful lake. When the two sides can't agree on what was actually agreed to in Switzerland, that's not a foundation. That's a fault line. And fault lines are where deals actually collapse. Okay, here's the PCE angle that connects all of this to the Fed. PCE inflation. The Fed's preferred measure was running at 2.8% year over year before the conflict started. Core PCE was 3%. Those numbers got worse in March and worse again in April. And the energy component drove nearly all of it. No surprises there. The reversal works in the same way on the downside. Energy carries roughly 7 to 8% of the CPI basket. A sustained crude decline of $30 to $35 from crisis highs is the difference between headline CPE printing 3.5% and printing 2.5% by early 2027. I did that math for you there. Important caveat though. Core inflation, though, doesn't move much on oil loan. The structural stuff, services, shelter, tariff pass-through, wages, that doesn't go away because the Strait of Hormuz reopened. Wars is still dealing with all of that stuff. But the energy tailwind buys him a little bit of breathing room, and breathing room in a hawkish Fed regime is worth something. I've been doing this, guys, long enough to know that the market doesn't price risk evenly. It prices the scenario that feels most likely on a given morning. And then it gets surprised by the others. So let me give you all three scenarios and you can decide for yourself where the money is actually sitting. Scenario one is the Trump deal. I put the probability between 20 and 25%. Everything goes right on schedule. Lebanon holds. IAEA inspectors enter Iran this week, as promised. The nuclear question gets resolved or kicked far enough down the road that both sides can live with it. Final deal by August 16th. WI, WTI, excuse me, tests the low in the low 60s. Brent pushes toward 65 to $70 a barrel. The inflation math on scenario is significant. A sustained $30 to $35 per barrel decline from crisis highs, knocks roughly eight tenths of a percent to 1.2 percentage points off headline CPI by early 2027. Kevin Warsh, who is not in the business of cutting rates as an active charity, as you probably know, gets natural cover to signal rate cut path for mid-2027. For everyday families, gas goes back toward $2.80 to maybe $3 by October, roughly a dollar less than today, where we are right now. For a family driving 1,000 miles a month and a car getting 25 miles per gallon, that's about 40 bucks a month back in their pocket. I did the math, so you don't have to. And that's just the direct fuel cost. Energy is embedded in almost everything. As you probably know by now, grocery delivery, airline tickets, the fertilizer that goes into the food supply, the downstream relief compounds. Now let's go to scenario two. I call this the managed muddle. It's where I put roughly 50 to 55% probability. This is the base case, the 60-day window that produces something, but not everything. Hermuz operates at 60 to 70% of normal capacity by September. The nuclear question stays unresolved, permanently embedding a risk premium in oil prices. WTI settles in the $72 to $78 range. Gas drifts down to $3.50 to maybe $3.70 by fall, meaningful relief, but not a return to February. Warsh holds rates flat, no cuts in 2026 at all in this scenario. And the Iran story becomes background noise, which from a market standpoint, stability standpoint, is actually the best achievable outcome at the moment. Scenario three is the one that nobody at a dinner party wants to say out loud loud. I call this the Swiss trap. I assign it roughly 20 to 25% probability. This is the 60-day clock where which has the 60-day clock running out with a final deal. The nuclear gap, it doesn't close. Iran walks away, Hermuz goes back to full restriction. WTI spikes back toward 90 bucks a barrel. Gas returns to $4.50. Headline CPI reaccelerates toward 4.5%, or even worse. WASH is forced to raise rates. The yield curve, which just flattened on ceasefire optimism, it blows back out. I had a video out on that just the other day. Check it out. Recession risk climbs materially. The market this morning is priced between scenario one and scenario two. Cautious optimism for people who've watched this movie before and know the third act is always the hardest. The smart money is not betting on the best case. It's hedging for the base case and keeping one eye on the nuclear spoiler. Watch whether the IEA inspectors actually show up in Iran this week. That's really, really important. If they don't, move scenario three's probability up and scenario one's down. The market hasn't done that math yet. You should. For investors, energy stocks are currently priced for a $75 to $80 barrel oil. A full Hermuz normalization means that the sector reprices lower. Fixed income gets interesting. If Warsh gets natural cover from energy deflation to hold rates and signal patience. And if you're sitting on cash waiting to deploy, a world where oil is at 65 bucks and headline CPI is heading toward 2.5% is a very, very different deployment environment from the one that we've been living in since February 28th. The foundation is there on Wall Street. The distance, though, between a foundation and a finished house is literally where all the risk lives. So your truth bomb for today is this the market is pricing optimism on a deal that just closed the strait again on Saturday. And the IAEA inspection that hasn't happened yet is the only concrete that makes any of this real. Join me every day for Wall Street Truth Bombs, where I drop a right here before the market figures them out. Concrete and all.